Is an Employer of Record (EOR) the Right Fit for Your Global Hiring Strategy?

a business man using a magnifying glass and looking at hiring strategy concept

The Race for Talent is more intense than ever, with businesses across the globe grappling to fill critical roles amid a widening labor shortage. In Europe, nearly half (46%) of companies report difficulties finding workers with the necessary technical skills. In the US, 45% of STEM (Science, Technology, Engineering and Mathematics) professionals with PhDs are foreign-born, highlighting the growing demand for global talent.

To stay competitive, companies are increasingly turning to international hiring strategies. Global recruitment allows organizations to tap into diverse talent pools, expand into new markets and enhance their global footprint. However, hiring across borders brings its own set of complexities. Hurdles range from navigating labor laws and tax regulations to understanding local cultural norms and best practices.

Traditionally, businesses had two main options: sponsor foreign workers through employer-sponsored visas or establish a legal entity in the target country to hire directly. While setting up a local entity offers full control, it is both costly and time-consuming. Visa sponsorships, on the other hand, are plagued by strict regulations, quotas and bureaucratic delays – making them a challenging option.

This is where an Employer of Record (EOR) comes in, offering a flexible and cost-effective alternative for global hiring. An EOR allows companies to hire employees in foreign countries without the need to establish a local entity. By managing HR, payroll, benefits and compliance on behalf of the business, an EOR enables companies to focus on their core objectives.

But is an EOR the right solution for your global hiring strategy? Let’s explore scenarios where an EOR provides the perfect fit.

Testing a new market

When a business is considering entering a new international market, committing to a full legal entity can be premature. Hiring local employees is crucial for understanding market dynamics, consumer behavior and competitors. However, setting up a subsidiary can take months and be resource-intensive.

Case study: A U.S.-based tech startup expanding into Germany

A U.S. tech startup wanted to test the German market with a new software product. Instead of establishing a local entity, they partnered with an EOR to hire a local marketing manager and sales lead. The EOR handled all the compliance, payroll and benefits –allowing the startup to focus on its go-to-market strategy.

After six months, the company gathered valuable insights from the German market. Based on positive results, the startup proceeded with a more permanent presence. The EOR provided a low-risk, low-cost way to enter the market.

Hiring go-to-market talent

When expanding into new markets, businesses often need local expertise to understand the nuances of consumer behavior, market conditions and competitive landscapes. Hiring go-to-market talent who understands these local dynamics is essential for crafting effective strategies and achieving successful market entry.

For companies still assessing the viability of their offerings in a new region, engaging an EOR can provide an excellent short- to medium-term solution. This approach allows companies to bring in local talent without the long-term commitment of establishing a legal entity. This makes it a lot easier to pivot if the market proves challenging.

Case study: A technology company entering the Indian market

A U.S.-based technology firm wanted to explore the Indian market without making a long-term commitment. They hired a local go-to-market manager and two sales representatives through an EOR to gather insights on consumer preferences and competitive dynamics.

After a year of positive results and increased demand, the company decided to establish a permanent presence in India. The EOR facilitated quick hiring and maintained compliance, allowing the firm to focus on growth and market strategies.

Asset carveout M&A deals

In an asset carveout M&A, a company divests a portion of its business while retaining its core operations. One significant challenge during this process is the issue of “orphaned employees” – those who were part of the sold asset but find themselves without a legal employer after the transaction. Addressing the employment status of these individuals is critical to maintaining continuity and morale.

Using an EOR can be an effective solution for managing orphaned employees. The EOR can take on the employment of these individuals. The employees continue to receive their salaries, benefits and legal protections. At the same time, the newly independent entity can focus on its operational goals without the immediate burden of establishing a new legal entity.

Case study: asset carveout M&A in the pharmaceutical industry

A major pharmaceutical company sold off a segment of its research division through an asset carveout M&A. As a result, several employees from the acquired division became orphaned, lacking a legal employer. To address this issue swiftly, the company partnered with an EOR to manage the employment of these individuals.

The EOR facilitated the hiring of the orphaned employees, ensuring they received their salaries and benefits while navigating local labor laws. This approach allowed the newly independent entity to retain critical talent and knowledge essential for maintaining ongoing projects. Within months, the transition was smooth, enabling the new company to continue its operations without disruption.

Scaling international operations

For companies in growth mode, such as startups, expanding quickly across borders is often necessary to maintain a competitive edge. However, opening multiple legal entities across several countries can become a significant burden, both operationally and financially. EORs simplify scaling by allowing companies to hire employees in new markets without the need for legal setups.

Case study: a healthcare company expanding into Asia Pacific

A healthcare company based in Europe wanted to expand its operations in the Asia Pacific (APAC) region, starting with Singapore, Japan and Australia. They needed to hire 30 new employees across these regions within six months. There were set plans to permanently operate in the region. However, setting up entities in each country would delay their plans.

By partnering with an EOR, the company successfully hired all employees within the required timeframe while complying with local employment laws. The EOR managed payroll, taxes and benefits. The arrangement allowed the healthcare company to focus on business development and market entry.

Hiring remote teams globally

The rise of remote work has opened doors for companies to hire global talent, regardless of geographic boundaries. For companies without a local presence in the countries where remote talent resides, an EOR offers a compliant way to hire and manage employees.

Case study: software development firm hiring remote engineers

A U.S.-based software company wanted to hire a team of remote engineers across Eastern Europe. Instead of setting up entities, they utilized an EOR to hire, onboard and manage engineers across Poland, Ukraine and Romania. The EOR took care of local tax compliance, payroll and benefit contributions. The company was able to focus on project delivery without worrying about regulatory hurdles or complexities with cross-border payroll.

Are you ready to hire through an EOR?

The ability to seamlessly navigate international hiring is not just a luxury—it’s become a necessity for survival and growth. An EOR emerges as a powerful ally for businesses seeking to expand their footprint without the financial and operational burdens of establishing local entities.

Whether testing new markets, managing short-term projects or scaling operations, an EOR offers the flexibility, speed, and compliance necessary to thrive in diverse environments. By embracing the EOR model, companies can focus on their core growth objectives while leaving the complexities of global workforce management to experts.

In this landscape, leveraging an EOR is not just a strategic choice—it’s a game changer that opens doors to new opportunities and empowers businesses to unlock their full potential on the global stage.

Contact us to talk with an international expansion expert about how our cross-border solutions can support your business goals.

The content provided in this publication is for general information purposes only and should not be considered legal advice. Due to potential changes in regulations, the information may become outdated. GoGlobal and its affiliates disclaim any responsibility for actions taken or not taken based on the information contained in this publication.